Emcor upgraded by Goldman Sachs as data center boom outpaces building slump

[Building and Powering Big Data]
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Goldman Sachs late Monday raised its rating on Emcor Group (NYSE:EME [https://seekingalpha.com/symbol/EME]) to Neutral from Sell, citing faster-than-expected growth in data center revenues that have offset weakness in broader non-residential construction.

Analyst Adam Bubes noted that when Goldman initiated coverage with a Sell rating last November, the concern was that a downturn in private non-residential building activity would weigh on results despite momentum in data centers. Since then, private non-residential spending has contracted 4% year over year, compared with 2% growth in 2024.

However, Emcor’s (NYSE:EME [https://seekingalpha.com/symbol/EME]) exposure to hyperscaler investment has exceeded expectations.

“EME’s data center revenues have accelerated well ahead of our expectations (+112% yoy, including the Miller acquisition), prompting upward revisions to our organic growth and margin forecasts despite slowing private non-residential construction spending,” Bubes wrote in an Oct. 6 report to clients.

The company’s stock has gained 30% since Goldman’s initiation, versus a 14% rise in the S&P 500 over the same period. Data centers now make up about 25% of Emcor’s (EME [https://seekingalpha.com/symbol/EME]) revenue, up from 16% less than a year ago. Goldman expects data center construction spending to grow at a 20% CAGR between 2025 and 2027, and raised its ebitda estimates for those years by 2%, now sitting slightly above consensus.

Still, Goldman stopped short of turning bullish. The report cited Emcor’s (EME [https://seekingalpha.com/symbol/EME]) stretched valuation and continued softness in its non–data center businesses as reasons for caution.

“We remain on the sidelines as (i) valuation appears relatively full at current levels, and (ii) the growth outlook for EME’s non–data center business remains soft while data centers drive the bulk of growth,” Bubes said.

He added the team “would look to get more positive if leading indicators for Emcor's non-data-center revenues start to accelerate.”

Goldman lifted its price target on Emcor (EME [https://seekingalpha.com/symbol/EME]) to $675 a share from $495 previousl.

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